The Chartered Institute of Taxation (CIOT) is calling for the proposed capital gains tax (CGT) changes for trusts and companies set up by UK resident non-domiciliaries to be deferred until a proper assessment can be made of the impact on the UK economy.
Commenting on the proposals announced in the 2007 Pre-Budget Report in October, John Barnett, CIOT spokesman, said:
"As well as introducing a £30k p.a. charge for non-doms, the pre-Budget report proposals also made vague reference to extending certain anti-avoidance provisions which do not currently affect non-doms. Although it is not entirely clear, we understand that under this heading the government may be contemplating changing the CGT treatment of offshore trusts and companies set up by non-doms.
"While it may be tempting to seek to raise additional tax from non-doms in this way, it needs to be recognised that the non-dom population are, by definition, highly internationally mobile and in many cases can choose to invest in foreign rather than UK businesses and assets.”
The Institute believes there to be a significant danger that non-UK domiciliaries will move their investments out of the UK and potentially even relocate altogether. The loss to the UK economy as a whole might be substantial. The City of London could be particularly affected as could other specific sectors such as the international art market (which could easily relocate to New York or elsewhere). Potential changes of this sort are of an entirely different magnitude to the £30k proposals and should not be enacted without a careful study of the economic effects. The CIOT hopes that, if the suggestions as to the direction of change are indeed correct, implementation of any proposals is deferred until, say, April 2009 to allow for proper study and consultation. This would coincide with other aspects of the proposed changes which are already set to be delayed until that date.
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